Ambitious plans for new company owned by South Kesteven District Council

Judith Hawkins

Plans are well under way to set up a local authority controlled company (LACC), enabling South Kesteven District Council to generate income within the private sector.

Back in July, the Journal reported on SKDC’s proposal to create a LACC, a step councils are able to make under the Localism Act 2011. On Monday, further details on the company were presented to cabinet members, including on how its initial focus will be to deliver private sector housing.

In a meeting with the Journal, SKDC’s chief executive Beverly Agass, corporate finance manager Richard Wyles, and strategic director for community and environment Tracey Blackwell explained how the company would operate.

“It will be 100 per cent owned by the council, so it’s not about individuals benefiting as shareholders from the operations of this company,” explained Ms Blackwell. “The council will be getting the benefit of the profits, which will be used to deliver services within the community.”

Mrs Agass said the decision to set up the LACC had come about as a result of reduction in Government grants, and to meet the identified need for more housing. The company would look to offer property both for rent and sale, developing sites which they say would not be attractive to other developers due to the amount of return.

“Our aim is to get houses built, not necessarily to make a massive return for a shareholder, so we are able to look at sites which would lay dormant otherwise,” said Mrs Agass.

The LACC will be headed up by a board of directors, to be appointed from SKDC officers, with the potential to also appoint a minimum of one external representative with business experience. Councillors would not be able to sit on the board, but would have a role in holding the directors to account as a shareholder committee. This would meet to hear how the company is delivering its business plan and managing finances.

Mr Wyles said: “The board has to operate in the interests of the company and not be fettered by political agendas, to keep that integrity preserved.” He added that any external director may only have an advisory role rather than voting rights on the board.

SKDC’s management also confirmed that if any planning permissions for developments were required by the LACC, the company would have to go through the same process as any other business and apply to the council. It would also be subject to business rates, VAT and corporation tax.

As the company will not employ any staff initially, council staff will be seconded to the LACC to undertake company related work, and their time charged accordingly.

Ms Blackwell also outlined how they hope to ‘raise the bar’ in rented housing provision, and bring the council’s experience in social housing to support tenants in LACC properties. Yet while the intention is to start with housing, the company is not being limited to this and could trade in more services in the future.

Furthermore, they are not completely ruling out selling shares in the LACC, although this is not part of the initial plan. Mr Wyles said: “I think once it’s matured we will revisit that, but to start with, no-one with investment is going to want to come forward because it’s such an emerging company.”

SKDC will be providing an initial loan to the LACC to start up, with an indicative financial model putting this in the region of £1.5 million, yet to be confirmed. Ms Blackwell added that there would benefits ‘from day one’ from the LACC’s ability to accrue interest on this loan.

Asked what they would say to those concerned about this use of public money, Ms Blackwell said: “The LACC wil be 100 per cent owned by the council and it’s going to bring resources, opportunities and services for the community that we know are needed.”

With the approval of SKDC’s cabinet on Monday, the drawing up of the company’s articles of association and governance has been delegated to officers, which will then need to go through SKDC’s constitution committee before being presented to full council in February. By April they hope to have the business plan and governance in place ready to start the LACC.

Mrs Agass said: “It is a different way of working, but if we sit here and don’t do anything, then we will be limited in our resources and in what we can deliver.”